Significant fiscal and external buffers have enabled Qatar to successfully absorb the adverse shocks from the 2014-16 decline in oil prices and the diplomatic rift with its neighbours, according to the International Monetary Fund (IMF).
Near-to medium-term outlook remains favourable in the context of relatively higher hydrocarbon prices, prudent fiscal policy, healthy financial system and accelerated structural reforms, an IMF team said after its meeting with Qatari authorities last week.
“Qatar’s economic performance continues to strengthen. Non-hydrocarbon output grew by about 6% during the first half of 2018, as the economy recovered from the impact of the diplomatic rift and oil prices surged,” it said.
However, hydrocarbon output fell by about 1.6% during the same period, culminating in overall real GDP growth of 2.3%, it said, adding real GDP growth of 2.4% is projected for 2018 as a whole up from 1.6% in 2017.
Fiscal and external positions are strengthening, and the central bank’s foreign exchange reserves have increased, it said, adding monetary and financial conditions have improved “significantly”, with banks attracting non-resident flows and were able to reduce reliance on the financial support from the fiscal and monetary authorities.
Highlighting that the near-to-medium term outlook for the Qatari economy is benefiting from increased oil prices and prudent macroeconomic policies, IMF said: “We anticipate overall real GDP growth of 3.1% in 2019, with still robust non-hydrocarbon growth and recovery in oil and gas production.”
Over the course of 2020-23, real GDP growth of about 2.7% annually is projected, underpinned by still significant public infrastructure spending, expansion of liquid natural gas production, and the hosting of 2022 World Cup, it said.
Despite higher oil prices, Qatar plans to pursue prudent fiscal policy while taking into consideration its associated impact on the economy.
The 2019 budget is expected to contain overall expenditure growth, with continued emphasis on allocation to critical sectors (health and education).
The current account surplus is projected at about 7% of GDP (gross domestic product) in 2019. Qatar Central Bank’s foreign exchange reserves are expected to increase further, reaching about $36bn in 2019.
Finding that progress with structural reforms continues, IMF said the second national development strategy highlights the need for economic diversification.
The strategy identifies priority sectors including manufacturing, financial services, and tourism, while emphasising competitiveness and the role of the private sector.
The private sector committee is promoting public-private partnership in areas such as food security, manufacturing, health, and education.